Never Retire - The Flexible Budget Strategy I Use To Pay My Bills, Spend, And Save As A Freelancer With Multiple Income Streams
We often discuss backwards budgeting and regularly allocating cash to pots of money as core Never Retire personal finance strategies.
In today’s installment, we dig into my personal budget and detail how I direct my income as a freelancer with three income streams.
A paid subscription to the Never Retire newsletter includes installments such as today’s where we bring strategies to life with actual numbers from my life.
But first, the relevant background—
A Medium article from June, 2021, with a broad explanation of the pots of money approach to personal finance.
A Never Retire newsletter post from mid-August that details several core themes and strategies, including backwards budgeting—
It’s all about organizing your money and work around your life, not the other way around.
This has practical and psychological applications.
Practically, it includes backwards budgeting.
It’s typical in our society to look at how much money you make and proceed to carve out a lifestyle that fits snugly inside that number.
That’s traditional budgeting.
You create a pie chart, then allocate a percentage of your earnings up to 100%.
It takes a second—or longer—to wrap your head around, but you’re not organizing your money and work around your life. Rather, you’re letting your lifestyle speak for all of your money before you even have a chance to determine what might make better financial sense.
Ignore how much you make.
Find the floor on your cost of living. You’ll give yourself a better chance of running meaningful monthly surpluses than if you just set aside 10-15% for “savings” and spend the first 85-90% on the standard budget line items.
Your lifestyle goes easy on your money this way, so that you give yourself the personal financial breathing room to organize money and work around your life, not the other (conventional) way around.
If you freelance or own your own business—and collect variable income—you might have no choice. Therefore, this approach can provide psychological comfort because you’re less likely to fall short in a month when your earnings hit low. It also helps you avoid lifestyle inflation. Because you won’t be as tempted to expand your budget to swallow up any extra money you start to earn.
At least that’s how it has worked out—in practice—for me.
Now, the specific method and actual numbers I use to execute a backwards budgeting, pots of money Never Retire strategy. One you might just adapt to suit your circumstances.